Guest Speaker: Julia Bishop

SIPS Speaker September 22, 2015: Julia Bishop

Julia Bishop currently works an associate for Troutman Sanders.  She earned her J.D. from the College of William and Mary in 2010 and has been working in the IP field since.  Julia Bishop’s current practice focuses primarily on intellectual property law, namely trademark and copyright law, and internet law, but her representation ranges in scope.  More specifically, her practice involves litigation and pre-litigation, fair-use based copyright infringement cases, and licensing agreements.

During her presentation, Julia Bishop offered advice on how to approach a career in IP law and how to succeed once you are there.  Emphasized was the concept of being a citizen lawyer.  As a lawyer you are put into position of power where you have the ability to help people.  It is important to do the best work you can for clients and to occasionally take pro bono cases.  Making the people the source of your motivation can be very helpful.  As a new attorney, it is not as necessary to bring in new cases, however it is always helpful and will lead to raises.  The best way to get new clients is by doing great work for the clients you currently have.  Reputation is everything to an attorney.

In her career, Julia Bishop worked at a number of firms and clerked for the Norfolk Circuit Court.  She noted the importance in being able to turn down an offer or leave a job if it is not what you want.  If you position yourself correctly and realize your own value, you will eventually find a job you are happy with.  Julia Bishop noted that her time clerking was a great experience and was very helpful to her career in litigation.

Additionally, Julia Bishop stressed the importance in taking an active role in law school by getting involved with a journal, a bar, and/or discussion courses.

– Ryan Klima
JD Candidate, 2018

2014 Summer Networking Program Recap

By Mark Cramer, SIPS Vice President for Career Outreach and Alumni Relations

Summer Networking Cities

We’ve just wrapped up another great year of SIPS’ annual Summer Networking Program! More than 20 alumni participated in the program this year in DC, Richmond, Boston, Norfolk, Cincinnati, and San Francisco. Our alumni generously offered their time and advice to current and graduating SIPS members, sharing their perspectives on surviving law school, excelling at the job search, and maintaining a balanced life while practicing law. They represented a variety of career paths including private practice, business, government, and academia.

The SIPS team is incredibly grateful to all of our participants – this continues to be a successful program for us, and we really value the chance to spend time with practitioners and continue building the W&M IP Law community. Thank you again to our alumni participants across the country for your support!

This is not a copy of a coffee shop, just a parody. That sells coffee.

By Dave Johnson

Dumb Starbucks Menu Board

Over the weekend, a parody coffee shop called “Dumb Starbucks” opened in an affluent suburb of Los Angeles. Dumb Starbucks closely imitates the interior design elements of the average Starbucks coffee shop; uses a nearly identical logo (the only change is the compression of the word “Starbucks” to allow room for the word “Dumb”), identical fonts and colors; and sells coffee. Dumb Starbucks is also found in a strip mall, much like many Starbucks locations. Photos of the storefront and interior signage can be found on Dumb Starbuck’s Twitter feed (@dumbstarbucks). The menu is very similar to that of Starbucks, except with the word “Dumb” before every menu item. Interestingly, Dumb Starbucks appears to be giving its coffee away for free, but purports to sell the coffee. Rachel Zarrell & Ashley Perez, Peope Are Waiting For Hours to Visit a “Dumb Starbucks” Coffee Shop in California, BUZZFEED (Feb. 9, 2014, 5:30 PM), http://www.buzzfeed.com/rachelzarrell/a-dumb-starbucks-coffee-shop-is-the-newest-craze-in-californ. Several news articles have also posted a picture of Dumb Starbucks’ FAQ, in which the restaurant makes clear that it is “not affiliated in any way with Starbucks Corporation” and that they are “simply using their name and logo for marketing purposes,” claiming the fair use defense of parody. See ‘Dumb Starbucks’ Mystery: Who’s Behind the Faux Coffee Front in Los Feliz?, SCPR (Feb. 9, 2014, 11:55 AM), http://www.scpr.org/news/2014/02/09/42085/dumb-starbucks-coffee-shop-opens-in-los-feliz/. The company asserts that “[b]y adding the word ‘dumb,’ [they] are technically ‘making fun’ of Starbucks,” allowing them fair use of the trademarks as a work parody art. The company argues that the storefront is their gallery featuring their coffee art.

Certainly, the creators of Dumb Starbucks have an interesting experiment on their hands. The Starbucks name and the mermaid logo are registered trademarks of Starbucks Corporation for numerous classes of goods and services. As such, Starbucks has an obligation to enforce their rights to the marks. The question is whether Dumb Starbucks can actually claim the defense of fair use by parody that they promote in their FAQs. First, Starbucks must proven infringement of their marks. The relevant test is “likelihood of confusion” under sections 32 and 43(a) of the Lanham Act, which can be established with a showing of the probability (actual confusion not required) that consumers will be confused, demonstrated by applying one of the multi-factor analyses, such as the Polaroid factors. These factors include: (1) the strength of the senior user’s mark; (2) the degree of similarity between the marks; (3) “the proximity of the products”; (4) “the likelihood that the prior owner will bridge the gap”; (5) “actual confusion”; (6) the junior user’s “good faith in adopting its own mark”; (7) “the quality of the [junior user]’s products”; and (8) “the sophistication of buyers.” Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961). Absent consumer confusion, there is no cause of action. It is interesting to note that Starbucks spokesperson Megan Adams, in reply to questions about the parody store, stated, “It’s obviously not a Starbuck.” See ‘Dumb Starbucks’ Mystery, supra (internal quotation marks omitted). Running through the Polaroid factors shows that Starbucks may have a strong case for likelihood of confusion: the Starbucks mark is a strong mark; the Dumb Starbucks marks are nearly identical (differentiated only by the addition of the adjective “Dumb”); the products are identical; there is no gap for Starbucks to bridge between the goods offered for sale; and, Dumb Starbucks has a stated bad faith in using the marks (“We are simply using their name and logo for marketing purposes.”). However, actual confusion might be a toss-up and, for better or worse for Starbucks, coffee drinkers are rather particular consumers with strong preferences for their cup of joe.

Arguendo, let’s assume there is actual confusion and a court could find a likelihood of confusion. A bleary-eyed caffeine addict might drive down the road and see the familiar green circle housing the mermaid queen of Sumatran roast and venture into the store without thinking further. While in the store, the consumer might recognize that the menu labels all the beverages as “Dumb,” but, since it serves coffee and she is already in the store, may proceed to purchase anyway. With a finding of likelihood of confusion, Dumb Starbucks has to rely on their parody defense. As the authors of McCarthy on Trademarks and Unfair Competition note, “the cry of ‘parody!’ does not magically fend off otherwise legitimate claims of trademark infringement or dilution. … A non-infringing parody is merely amusing, not confusing.” 6 MCCARTHY ON TRADEMARKS & UNFAIR COMPETITION § 31:153 (4th ed.). Parody does not operate as a pure defense to trademark infringement, but prevents the finding of a likelihood of confusion; that is, with an effective parody, a reasonable consumer will understand that there is no affiliation between the owners of senior mark and the parodying mark.

That raises the question of if Dumb Starbucks is more like the advertisements for Michelob Oily from Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d 769 (8th Cir. 1995) or Chewy Vuiton dog toys, Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007). In Balducci, an advertisement mimicking Michelob beer advertisements was used to parody a Shell oil spill in a source of Anheuser-Busch’s water supply, which the Eighth Circuit found had taken insufficient steps to insure that “viewers adequately understood this was an unauthorized editorial.” 28 F.3d at 777. That court did not permit the infringing use of the Anheuser-Busch’s trademarks despite the claimed parody. Similarly, in Hard Rock Cafe Licensing Corp. v. Pacific Graphics, Inc., 776 F. Supp. 1454 (W.D. Wash. 1991), the court disallowed the use of the “Hard Rain” logo mark, which was similar to the Hard Rock Cafe logo mark, stating that “[a] defendant’s claim of parody will be disregarded where the purpose of the similarity is to capitalize on a famous mark’s popularity for the defendant’s own commercial use.” Id. at 1462 (internal citation omitted). These cases point to a finding that Dumb Starbucks, which closely imitates the Starbucks marks and does so for the purpose of their own commercial gain, while only disclaiming affiliation in their FAQ, should be enjoined from using the Starbucks marks despite their parody claim.

On the other hand, Haute Diggity Dog involved the imitation of the luxury brand Louis Vuitton’s trademarks on chew toys for pets, which was found to be successful parodies. 507 F.3d at 256-57. Dumb Starbucks’ FAQ makes clear that it is not affiliated with Starbucks. In the way that Louis Vuitton likely would not make cheap rubber imitations of its luxury goods, Starbucks would not open a restaurant calling the parent company “dumb.” Similarly to Balducci, though, the marks being used are nearly identical (at least on first impression) and, as pointed out with our caffeine addict above, actual confusion probably can occur. It would have been interesting to see how a parody claim might have played out in The North Face Apparel Corp. v. Williams Pharmacy, Inc., No. 4:09CV2029RWS, 2010 WL 546318 (E.D. Mo. Feb. 9, 2010), a case in which The North Face obtained a permanent injunction against the sale of apparel bearing the confusingly similar mark “The South Butt,” but that case never made it to trial.

Another thing is certain: Starbucks will have to respond one way or another to protect their trademarks. The situation with Dumb Starbucks is highly similar to the Hard Rock Cafe case. While a consumer may be able to determine that the parody restaurant is not affiliated with Starbucks, the stated purpose is to capitalize on Starbucks’ popularity. Since no single Polaroid factor is determinative, and given the bad faith of Dumb Starbucks, Starbucks should be able to prevail in protecting their marks. Allowing Dumb Starbucks to coexist in the same industry as Starbucks would set a bad precedent by allowing undesirable free riding.

IP Discussions Around the Web

IP Discussions Around the Web

  • From Legal Theory Blog, Rosenblatt on Intellectual Property’s Negative Space:

    The result suggests areas of misalignment between traditional intellectual property rights and remedies and the interests of many creators and innovators.

  • From the Originalism Blog, a look at the constitutional history of copyright from Randolph May and Seth Cooper.
  • Madisonian has a take on Joffe v. Google, the important case from the 9th Circuit involving whether Google’s intercepting local Wi-Fi signals might run afoul of the Wiretap Act.
  • TechDirt has an article explaining how frequent patent litigant Eli Lilly has sued Canada for… refusing to give it a patent. Apparently we need to keep an eye on NAFTA, not just TRIPS and PCT.
  • Patently-O has a guest post on Lighting Ballast v. Phillips oral argument. This is an important (en banc) case where the Federal Circuit is re-visiting the rule in Cybor Corp. about de novo review of claim construction. We’ll be paying attention to what happens here.

And we’re back

It’s a new semester, and we’re continuing to aggregate various IP-related stories from around the web. As always, if you think there’s something we should highlight, e-mail us.

  • The Legal Theory blog brings to our attention Lisa Oullette discussing an interesting take on Patent Experimentalism:

    Local actors — patent examiners, judges, or even individual countries — should be granted broad discretion to meet centrally defined framework goals, with the requirement of defending their decisions through robust peer review.

  • Bernard Chao guests blogs at Patently-O about interpreting CLS Bank v. Alice—an important subject-matter case we’ve previously covered.
  • Over at Concurring Opinions, Irina Manta discusses whether Federal Criminal law can punish IP violations—here, here, and here. Michael Ramsey of the Originalism Blog comments here.

Smoke and Mirrors: Lorillard Tobacco. v. California Imports

by Maximilian Meese

In a time when tobacco companies operate in a haze of public scrutiny and health concerns, it is difficult for cigarette producers to keep a favorable trademark. For Lorillard, the oldest continuously operated tobacco company in the U.S., the struggle is no less real. Though Lorillard may not be a household name, they would like to think otherwise of their flagship brand: Newport cigarettes. With simple packaging and a well-developed trademark, Newport cigarettes have crawled to the top of the menthol cigarette market; over the entire cigarette industry, they sell second only to Marlboro.

It comes as no surprise that other producers might be tempted to profit from emulating such a recognizable brand. What Lorillard may not have expected is for the emulation to come from Global Market Direct (“Global”), a marketer of “aromatic potpourri herbal blends.” Translated from those over-flattering terms, Global advertised a synthetic marijuana substitute, or “spice” as peddlers often call it. The DEA has banned five separate ingredients of synthetic marijuana, but producers have found ways around restrictions by changing their recipes. At the time this particular conflict of interests began, head shops frequently, and legally, stocked their shelves with varieties of synthetic marijuana.

For Lorillard, imitation was far from flattery. Global’s line of “Newprot” herbs struck a little too close to home. Examine the difference for yourself:

newport

Subsequently, on November 5, 2010, Lorillard brought an action for infringement and counterfeiting of registered marks, trade dress infringement, unfair competition, and trademark dilution. Defendant brothers Majdi and Mohd Abujamous (acting as the spearheads behind the fictitious Global entity) eventually admitted to intentionally mimicking the Newport brand. On August 7, 2012, the court delivered an extremely easy decision: Majdi and Mohd are very, very liable.

Infringement: Check

Four counts of Lorillard’s claim pertained to infringement, and Lorillard easily hurdled the necessary elements: (1) Lorillard has a valid trademark; (2) defendants used the likeness of the mark; (3) defendants used the mark in commerce; (4) the mark was deployed in the sale, distribution, or advertising of goods or services; and (5) the use was likely to confuse consumers. A cursory glance at the facts would satisfy these first four elements, and the court agreed.

Determining if this imitation was likely to confuse consumers was albeit more nuanced, but no less in Lorillard’s favor. Following Pizzeria Uno Corporation v. Temple, the Fourth Circuit (our court of interest) relied on a list of seven factors to help determine consumer confusion: “(a) the strength or distinctiveness of the mark; (b) the similarity of the two marks; (c) the similarity of the goods/services the marks identify; (d) the similarity of the facilities the two parties use in their businesses; (e) the similarity of the advertising used by the two parties; (f) the defendant’s intent; and (g) actual confusion.”

The Newport mark is extremely strong, and the imitation is stunningly similar. Both goods are smoking products, sold out of similar stores with comparable point-of-sale advertising schemes. Finally, the Abujamous brothers testified to attempting a recognizable connection between the products. Despite not having actual confusion to point to, Lorillard clearly won.

Dilution: Check

The other count of Lorillard’s action related to dilution, which entails tests largely the same as infringement. Unsurprisingly, when a controversial product dresses up in the clothes of a nationally renowned brand, the result is quite predictable: the famous brand prevails. When the controversial product is known for injuries, illnesses, and toeing the blurry line of legality, the court spends more time signing the verdict against the defendants than it does applying these tests.

Bad Faith: Double Check

Lorillard won on every claim, and then some. By admission, the Abujamous brothers deliberately and willfully copied Newport, which worsened their position. Furthermore, their pre-trial conduct was so reprehensible that Lorillard collected on attorney’s fees and special costs. After avoiding summons and depositions, destroying physical evidence, and giving false testimony at every stage of the process, the Abujamous brothers were practically enemies of the court. In addition to the ruling for damages, Lorillard’s victory amounted to $290,000 in attorney’s fees, plus $18,000 in personal expenses.

The results of Lorillard are hardly novel. A two-bit operation of synthetic marijuana vendors pretended to be something they weren’t, and got punished for it. Despite this being an open-and-shut case, the lesson remains: keep your hands off other people’s trademarks. And when it comes to imitation, certainly don’t pick a brand as big as Newport cigarettes… you’ll only get burnt.

For more information on the case’s proceedings, see Lorillard Tobacco Co. v. Cal. Imports, LLC, 886 F. Supp. 2d 529, 2012 U.S. Dist. LEXIS 110871, 105 U.S.P.Q.2D (BNA) 1230, 2012 WL 4335290 (E.D. Va. 2012).

Kirtsaeng v. John Wiley & Sons

By Kristin Bergman.

For the second time in the last decade, the Supreme Court was presented with the challenge of ruling on a question of gray market goods in intellectual property law. The case, Kirtsaeng v. John Wiley & Sons, Inc. (No. 11-697), decided March 19, 2013, highlights the tension between Section 602(a)(1) and Section 109(a) of the Copyright Act.

Under Section 602(a)(1), “Importation into the United States, without the authority of the owner of copyright under this title, of copies . . . of a work that have been acquired outside the United States is an infringement.” However, Section 109(a), known as the first sale doctrine, asserts that the “the owner of a particular copy . . . lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.” In other words, once a copy has been legally sold, the owner can use and sell the copy without seeking the copyright owner’s permission. The issue presented to the Supreme Court, then, was in resolving these two sections, whether a foreign-made product may be resold within the United States, and if so, under what conditions.

Originally from Thailand, Supap Kirtsaeng came to the United States in 1997 to study. Recognizing the different pricing scheme for textbooks, Kirtsaeng had family and friends in Thailand purchase textbooks at a lower price and ship them to him. Kirtsaeng sold these textbooks on commercial websites such as eBay, eventually accumulating a profit of $900,000 dollars.

In 2008, John Wiley & Sons filed a lawsuit against Kirtsaeng for copyright infringement under the Copyright Act Section 602(a)(1) in the United States District Court for the Southern District of New York, as its subsidiary published eight of these textbooks in Asia. In response, Kirtsaeng invoked the first sale doctrine, from Section 109(a), as a defense. Both the District Court and the United States Court of Appeals for the Second Circuit found for John Wiley & Sons, holding that the first sale doctrine does not extend to goods manufactured abroad and imported into the United States. Kirtsaeng was required to pay $75,000 per infringement, for a total of $600,000 in damages. On April 16, 2012, the Supreme Court granted Kirtsaeng’s petition for a writ of certiorari, and the Court heard oral arguments for the case in late October.

The Supreme Court first considered this topic in Costco Wholesale Corporation v. Omega, S.A., 131 S. Ct. 565 (2010), where an equally divided court (due to Justice Kagan’s recusal) affirmed the Ninth Circuit’s holding. The Ninth Circuit interpreted the first sale doctrine to provide no defense to actions brought under Section 602(a) in cases where the copies at issue are legally-made, foreign copies. As Costco v. Omega provides no binding precedential value, the full Supreme Court had the opportunity to revisit this statutory interpretation of the first sale doctrine in Kirtsaeng. The Court was presented with two options for interpreting Section 109(a)’s “lawfully made under this title” with respect to the first sale doctrine. John Wiley & Sons argued for a plain-language interpretation, wherein “this title” refers to title 17 of the United States Code and only products made in the United States would qualify. The other standard, as Kirtsaeng argued, would interpret this phrase to mean “made wherever, in a way that satisfies U.S. copyright standards” such that it would be “lawful under this title” or, in other words, “in accordance with what this title would require if it applied.”

In a 6-3 decision from March 19, 2013, the Supreme Court of the United States adopted Kirtsaeng’s proposed interpretation, reversing the decision of the Court of Appeals and extending the first sale doctrine to copyrighted products manufactured abroad. Writing for the majority, Justice Breyer characterized these interpretations as “geographical” (John Wiley & Sons) and “non-geographical” (Kirstaeng). In examining the statute’s language, Justice Breyer noted the clarity of the statute, as “neither ‘under’ nor any other word in the phrase means ‘where.’” Considering this language and the prior version of the statute, which extended the first sale doctrine to copies “lawfully obtained,” Justice Breyer found no support for a geographically restricted interpretation of the first sale doctrine.

With $2.3 trillion worth of foreign goods imported to the United States in 2011, the majority opinion takes a rather pragmatic or “common sense” approach, heavily emphasizing the “parade of horribles” discussion that dominated oral argument. Justice Breyer recognized that if the Supreme Court were to adopt John Wiley’s geographic interpretation, there would be significant ramifications beyond the textbook market, reaching used car sales, libraries, museums, and more. As so many products made abroad contain copyrighted elements, to forbid importation and resale unless the copyright owner gave his permission would be absurd. Justice Breyer noted that these practical problems “are too serious, too extensive, and too likely to come about for us to dismiss them as insignificant—particularly in light of the ever¬growing importance of foreign trade to America.” With a concern about selective enforcement to avoid these problems, the Court projected a legislative intent, writing, “We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities.” Therefore, the Court held that the first sale doctrine applies without reference to geography, such that once a good is sold lawfully, it may be resold in the United States without the copyright holder’s permission.

Justice Ginsburg wrote the opinion for the dissent, joined by Justices Kennedy and Scalia. Justice Ginsburg wrote that the majority overstated the “parade of horribles” and overlooked the problem of market exploitation. In addition, the dissent argued that the majority opinion represents a “bold departure from Congress’s design.”
The full opinion for Kirtsaeng v. John Wiley & Sons, Inc. is available here.

Apple v. Samsung, Damages Update

By Jason C. Williams

On Friday March 1, 2013 Judge Lucy Koh handed down her decision regarding various motions that were filed on behalf of Apple Inc. (“Apple”) and Samsung Electronics Co. (“Samsung”) over the past few months post-trial. Specifically, Apple requested additur, supplemental damages, and prejudgment interest, while Samsung moved for a new trial on damages or remittitur. Judge Koh held that the “Court has identified an impermissible legal theory on which the jury based its award, and cannot reasonably calculate the amount of excess while effectuating the intent of the jury.” The total amount stricken from the jury’s award was $450,514,650 –pending a new trial on damages. The jury awards stands for the remaining 14 products for a total of $598,908,892 in favor of Apple.

I. Additur

Post-trial, Apple requested the Court to increase its damages award for five products because the jury gave an award less than what was calculated by Samsung’s damages expert. However, the Court pointed out that “Apple provide[d] no authority for the argument that the Court should not consider the jury’s specific findings.” Moreover, the Court stated that by doing so would be to violate the longstanding rule that the Seventh Amendment prohibits a judicial increase in a damages award made by a jury. See Dimick v. Scheidt, 293 U.S. 474, 486-87 (1935). Although Apple contends that this rule does not apply in this current case because there is no dispute about the proper amount of damages, the Court quickly and swiftly disagreed. In fact, the Court points out that “[t]he amount of damages is heavily disputed here, as evidenced by extensive testimony provided by both parties concerning the proper amount of compensation.” Additionally, the jury was not bound by either side’s damages testimony and therefore free to evaluate the testimony of both sides’ experts in arriving at its award. The Court denied Apple’s motion for an increase in the jury’s damages.

II. Supplemental Damages

Subsequent to the additur, Apple requested supplemental damages for the sales not considered by the jury. The Court agreed that supplemental damages were in order because both parties do not dispute “there are sales for which the jury did not make an award, because they occurred after the trial had concluded.” The Court pointed to Section 284, which requires that the Court award compensation for every infringing sale.

The Court went on to layout the three (3) primary issues it must address in resolving Apple’s request for supplemental damages: (1) the date from which the award should begin; (2) whether the law permits supplemental damages for post-verdict sales where an award of infringer’s profits is made pursuant to 35 U.S.C. §289 and (3) the proper method for calculating post-verdict damages in a case where the jury made no determination as to royalty rate.

While weighing all the evidence at its disposal the Court decided that the date from which the supplemental damages should begin is August 25, 2012, the day after the verdict. In reaching this decision the Court stated that “nothing precluded Apple from arguing that the jury should consider sales from June 30 through August 24, or from presenting evidence on how to estimate such sales. [The evidence presented to the jury ran only through June 30, 2012.]” With respect to whether the law permits supplemental damages for post-verdict sales where an award of infringer’s profits is made pursuant to 35 U.S.C. §289 –the Court seems to indicate that the law does permit such activity. Furthermore, the Court decided that both parties can present evidence of the actual number of sales for the purposes of calculating a royalty. However, “courts have found it appropriate to delay orders for the submission of such evidence and hearings thereon pending the resolution of appeals, to ‘avoid potentially unnecessary expenditures of time and money in preparing such account.’”(internal citations omitted). As a result, the Court delayed the consideration of evidence of actual post verdict sales until after the completion of the appeals of the case.

III. Prejudgment Interest

The Court was then faced with the decision of whether Apple was permitted prejudgment interest in light of “several of the products for which the jury made a damages award involved not just patent infringement, but also Lanham Act claims and thus resulted in damages awards that…compensate Apple for both trade dress dilution and patent infringement.” The Court saw no reason to resolve the apparent conflict, instead deciding that “[b]ecause prejudgment interest is clearly appropriate for this award based on patent infringement, the Court finds that there would be no reason to forbid prejudgment interest simply because the award also compensates for a Lanham Act violation, even if the Lanham Act did not separately authorize prejudgment interest.”

Both parties proposed a different rate for calculating interest. Apple wanted the prime rate, while Samsung pushed for the 52-week Treasury bill rate. While trying to determine the appropriate rate the court looked toward precedent that determined if the plaintiff “borrowed money at a higher rate, what that rate was, or that there was a causal connection between any borrowing and the loss of the use of the money awarded as a result of [the defendants] infringement.” Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed. Cir. 1997). The Court sided with Samsung in using the 52-week Treasury Bill rate, in part because Apple maintained substantial cash reserve and it does not appear that Apple borrowed any money due to deprivation of a damages award.

IV. Jury’s Damages Award

The heart the Court’s opinion dealt primarily with the jury damages award –specifically how the award was calculated and what information was used to calculate the award. Typically, if a Court finds an error in the jury’s damages verdict, the court basically has two options: to order a new trial on damages, or reduce the award to a supportable amount. The Court generally cannot award an amount less than maximum amount that is supportable by evidence presented. See D & S Redi-Mix v. Sierra Redi-Mix & Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982).

In determining whether the jury damages award was acceptable, the Court examined the notice date –as this was of great debate in both motions. Apple contented that the date of notice of possible patent infringement was August 4, 2010 in a meeting between both parties, while Samsung argued the date was April 15, 2011, which was the date the complaint was filed. The point of contention was whether Samsung was put on notice of all possibly infringing patents or just specific patents mentioned during the meeting. The Court found that “Apple cite[d] no evidence whatsoever that any patent-in-suit other than the ‘381 Patent was specifically identified during the meeting. Instead Apple points to general comparisons drawn at the meeting between the industrial design and user interface of the iPhone 3GS and the Galaxy S.” While one perhaps can imply that the Galaxy S infringes the iPhone 3GS patent, this does not provide notice of the specific patents alleged to be infringed. “This kind of non-specific notice is insufficient because a patent may have a broad or narrow scope, and a product may be covered by a multitude of patents, and also include many unpatented features.” Therefore, the Court found that the August 4, 2010 date is not supported by the evidence in the record for any patent other than the ‘381 patent. “Thus, the jury’s awards for patent infringement, which are based on …the early notice date [August 4, 2010], may have contained some amount of excess compensation covering the period before Samsung had notice of the relevant IP.”

Apple’s damages expert, Mr. Musika went through an elaborate process for calculating Apple’s damages for the period for which they were asking for. However, Mr. Musika did not testify “as to how the jury (or the Court) could calculate Apple’s lost profits for a shorter period of time.” This left the Court with little option to calculate Apple’s lost profits or a reasonable royalty for the relevant time period before notice of the other patents.

“As the Court can neither calculate an appropriate remittitur nor leave the award intact, the only remaining possibility is to conduct a new trial on damages…[f]urthermore, it was Apple’s strategic decision to submit an expert report using an aggressive notice date for all of the patents. The need for a new trial could have been avoided had Apple chosen a more circumspect strategy or provided more evidence to allow the jury or the Court to determine the appropriate award for a shorter notice period. Accordingly, the Court…strikes $383,467,143 from the jury’s award [pending a new trial on damages.]”

Similar exercises were conducted by the Court on the remaining patents to amount to a grand total of $450,514,650 being stricken from the jury’s award. The parties are encouraged to seek appellate review of this Order before any new trial. The jury award ($598,908,892) stands for the remaining 14 Apple products. So while Samsung currently received what some may consider a break, its liability is likely to increase after the new trial on damages in complete. Ultimately, however, the CAFC will decide the fate of both companies as it relates to infringement and damages should both parties decide not to settle.

Gunn et al. v. Minton

By Jason C. Williams.

On February 20, 2013, the Supreme Court of the United States ruled on the question of whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court.

The respondent Vernon Minton (“Minton”) developed a computer program and subsequent telecommunications network aimed towards facilitating securities trading. A few years later in 1995, Minton leased the very same technology to R. M. Stark & Co. (“Stark”). In January of 2000, the U.S. Patent and Trademark Office granted Minton a patent on his securities trading technology.

Mr. Minton proceeded to file a lawsuit against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market alleging patent infringement. Mr. Minton was represented by Jerry Gunn (“Gunn”). Almost immediately after the lawsuit was filed, NASD and NASDAQ filed a motion for summary judgment on the basis that the Minton patent was invalid pursuant to the “on sale” bar -35 U.S.C. §102(b). NASD and NASDAQ alleged that since Minton leased the product to Stark at least a year prior to the patent being issued, that Minton therefore should be barred from being issued a patent, as a matter of law. The District Court did not find Minton’s argument persuasive and granted the motion for summary judgment in favor of NASD and NASDAQ.

Minton proceeded to file a motion for reconsideration raising for the first time the argument that the lease agreement he had in place with Stark was for ongoing testing of the securities product, and as a result should fall within the “experimental use” exception. The District Court denied the motion and the case was then appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC), who affirmed the decision of the lower court in finding that Minton had waived the experimental-use argument.

While the merits of the patent infringement case are settled, Minton was convinced that but for his lawyers bringing the experimental use defense later in the appeals process, his patent infringement suit would have turned out differently. Therefore, Minton brought a lawsuit for malpractice action in Texas state court against his former legal representation. The former lawyer contended that the lease Minton made to Stark was not for experimental use, and thus the patent claims had a very good chance of being invalidated. “Ultimately the trial court agreed stating that Minton had put forth ‘less than a scintilla of proof’ that the lease had been for an experimental purpose.”

However, on appeal, Minton raised yet again a new legal argument. That is, because Minton’s malpractice claims arose out of a patent case that it “aris[es] under” federal patent law for the purposes of 28 U.S.C. §1338(a). Therefore Minton argued that even though he brought the malpractice suit in state court, the Texas state court lacked subject matter jurisdiction to adjudicate his case. Minton was looking for the state decision to be vacated and that he be allowed to start over in Federal Court.

While the Court of Appeals for Texas was divided, it ultimately rejected Minton’s claims. “Applying the test [they] articulated in Grable & Sons Metal Products v. Darue Engineering & Mfg, it held that the federal interests implicated by Minton’s state law claim were not sufficiently substantial to trigger 1338 ‘arising under’ jurisdiction. [The Court of Appeals for Texas] also held that finding exclusive federal jurisdiction over state legal malpractice actions would, contrary to Grable’s commands, disturb the balance of federal and state judicial responsibilities.” The Supreme Court of Texas reversed the Court of Appeals decision in part because they found that Minton’s claims had a “substantial federal issue” specifically “within the meaning of Grable ‘because the success of Minton’s malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar.”

The Supreme Court of the United States granted the Supreme Court of Texas Certiorari. The Supreme Court tried to simplify the issue by concentrating on whether the state-law claim raised a substantial and disputed federal issue, which a federal forum would be able to entertain without disturbing the approved balance between federal and state jurisdictional responsibilities. The Supreme Court went on to note that “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirement are met, we held, jurisdiction is proper because there is a ‘serious federal interest in claiming the advantages thought to be inherent in a federal forum.”

The Supreme Court unequivocally found that Minton’s legal malpractice claim does not arise under federal patent law. In fact, the Court goes as far as saying that state malpractice claims will rarely, if ever, arise under federal patent law for the purpose of §1338(a). The Court found that the merits of Minton’s case foundered on the Grable substantiality requirement. This requirement examines the importance of the issue to the federal system as a whole. “[As applied], the federal issue does not carry the necessary significance. No matter how the state courts resolve the hypothetical ‘case within a case,’ the real-world result of the prior federal patent litigation will not change. Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law.” Lastly, although Minton suggested that the state court answers to hypothetical patent questions could have an impact on future patents via issue preclusion, the Supreme Court refuted this notion stating: “but even assuming that [this] is true, such ‘face-bound and situation specific’ effects are not sufficient to establish arising under jurisdiction.”

The case was reversed and remanded. Chief Justice Roberts delivered the opinion for a unanimous Court.

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